Live music tours today are about promotion.

This is utterly untrue. I would bet that at least half of all live music in the US is not original bands playing their own songs but cover bands what whatnot playing in bars.

IF there's no product to promote, who will pay for this promotional activity?

Um, the venue? There are cover bands in my area that can PACK local bars, even big ones, and these bands make a ton of money. They bars pay them because people want to see them, and when they come to the bar to see them, surprise surprise, they buy drinks. I think in retail this would be called a loss leader.

Also, most smaller touring bands work with a booking agency. Take Slough Feg, for instance. They just started a US tour with 20+ stops, coast to coast. Their label is not paying a dime for this. I assume they pay a booking agent to book and promote shows. They cover this expense with the money they earn on tour (mostly merch, I would guess, but they probably make a few bucks on the door from time to time.) If people show up to see Slough Feg, it's because they like the band's music. It is irrelevant if they discovered the band by paying for CDs or downloading mp3s.

Of course, Slough Feg isn't going to make a lot of money, but honestly, they're a band with limited appeal. The point is that there are already mechanisms to finance live music that have nothing to do with recorded music.

Matt